Determinants of Demand for Wine – price sensitivity and perceived quality in a monopoly setting

The purpose of this paper is to characterise the demand for wine. In contrast to the majority of current research efforts this paper treats wine as a heterogeneous good with a range of inherent characteristics. Each wine included in the study is described by twelve variables including, among others, price, quality, sensory attributes and country of origin. Using unique data that cover 90 percent of all wines sold in Sweden we conclude that consumers do recognise quality in wine, that price elasticity is non-constant and decreasing with price and that consumers put a great deal of weight on the country of origin of the wine.